Fonterra steps up 13c/kg

10 Oct, 2018 04:13 PM
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Fonterra Australia managing director René Dedoncker said the increase in Australia would help support its farmers who are facing challenging conditions.
We are still seeing strong production coming from Europe, US and Argentina.
Fonterra Australia managing director René Dedoncker said the increase in Australia would help support its farmers who are facing challenging conditions.

Fonterra Australia has increased its farmgate milk price by 13 cents a kilogram of milk solids to an average $5.98/kg MS.

But it has cut its top end forecast milk price by 10c/kg to $6.10/kg MS.

The company has also cut the forecast end of season price for its New Zealand farmers from $NZ6.75.kg MS to $6.25-$6.50/kg MS.

Fonterra Australia managing director René Dedoncker said the increase in Australia would help support its farmers who are facing challenging conditions.

“Rising costs for feed and water due to the drought means that cashflow is even more critical for our farmers," he said.

"Receiving this increase in their milk payment now, rather than later in the season, will help our farmers make important decisions on input costs and plan for the remainder of the year.

“This milk price is reinforced by our strong Australian business which is performing well and generating repeatable returns, and is supported by tightening domestic supply of milk and the weakening Australian dollar.”

Mr Dedoncker said market conditions were putting downward pressure on the upper end of the forecast range announced in May.

“A weaker currency has only partially offset the impact of an increase in production this season in some other dairy-producing countries," he said.

“While it’s disappointing to have a reduction in the forecast closing price range, it’s important that we provide our farmers with clear, early signals on how the market is likely to impact the farmgate milk price."

In New Zealand Fonterra's chief executive, Miles Hurrell, also blamed stronger global milk supply for the cut in the forecast farmgate milk price.

“I know how hard it is for farmers when the forecast farmgate milk price drops, but it’s important they have the most up-to-date picture so they can make the best decisions for their farming businesses," he said.

“We are still seeing strong production coming from Europe, US and Argentina.

"While the hot weather in Europe has slowed down the region’s production growth, it is still tracking ahead of last year.

"US milk production is up slightly and Argentina’s is up 6.8pc.

“Here in New Zealand, the season has got off to a positive start, mainly thanks to good weather and early calving in the South Island.

"As a result, we have increased our forecast milk collections for the year to 1550 million kgMS – up from 1525 million kgMS.

Mr Hurrell said global demand was simply not matching current increases in supply.

“At recent Global Dairy Trade (GDT) events, prices for all products that make up the milk price have fallen," he said.

Although demand for whole milk powder was growing in China, and remained strong across South East Asia, it "simply isn't matching current levels of supply".

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